Capital Gains Tax may be one of those things you’ve heard of but have never really thought much about but as a business owner it’s definitely something that needs to be on your radar just so you don’t accidentally end up on the wrong side of the tax
In short when you sell something (and we’ll go into the specifics in a bit) you pay tax on the difference between what you paid for the item and what you’ve gone on to sell it for, so for example if you purchased a painting for £5,000 and then sold it on for £15,000 you would need to pay tax on the £10,000 profit or ‘gain’.
Now you may be sitting there thinking “but I don’t buy or sell paintings so what does this have to do with me?”
Sadly, it applies to many other things as well which you will likely come across including:
- most personal possessions worth £6,000 or more, apart from your car
- property that’s not your main home
- your main home if you’ve let it out, used it for business or it’s very large
- shares that are not in an ISA or PEP
- business assets
These are known as ‘chargeable assets’
Now there is some good news, we do like giving you good news; you don’t normally have to pay tax on gifts to your spouse or civil partner – now this may ring a bell if you’re a film buff and add “Shawshank Redemption” to your list of favourites. There is a brilliant scene where the main character, after hearing a particularly brutal prison officer complain about having to give a large share of money to the IRS, asks him “Do you trust your wife?”, a risky move if ever you saw one but in the end gains him and his friends a small respite. If you haven’t seen it, it’s an amazing film but we digress…
There are obviously some rules surrounding gifts especially if in time the gift is sold on or disposed of and the vital point here is to make sure you keep comprehensive records of any transfers of assets and any sums of money that have changed hands to ensure that you have that information to hand if asked.
In addition to gifts (and this does include gifts to charities), there is an annual tax allowance which stands at £12,300 at the time of writing and you also don’t pay Capital Gains tax if you’re lucky enough to have won the lottery or pools.
It’s important if you’re planning on selling or disposing of an asset/s that you are completely clear about if you need to file a report and what tax you need to pay but equally that you know about any “allowable losses” or any claimable reliefs that may reduce that payment to HMRC and that’s when just reading a blog isn’t going to cut it.
You can find all the details on the GOV.UK website or get in touch with your favourite accountants who will be able to steer you through these processes and make sure you get the most out of your money.
We’re here supporting your business so please do lean on us if you have any questions about how to get the most out of your money and if you’re not a client yet, call 07796 954685 to book a free 30-minute discovery session to find out how we can help you.